Shanghai may implement its own residential property tax measures to cool down price increases in China’s richest city, according to reports.
The measures are expected to be introduced this month, but the Shanghai Municipal Housing Support and Building Administration Bureau declined to comment when contacted.
According to Wu Jianxiong, an analyst from Central China Securities Holdings, property prices in the city may decline as much as 40 percent, if the new tax measures are implemented, and the drop in property prices in other Chinese cities are likely to follow.
Shanghai would be the first Chinese city to impose its very own property tax to curb speculation in the residential market and control price increases, which have triggered inflation concerns in the capital city.
A record from the National Bureau of Statistics showed that property prices increased by 12.8 percent in April from the previous year. That increase was the “last glimmer of the setting sun” before the government’s measures to curb property prices take effect, said Mr. Wu.
China curbed loans for second- and third-home purchases and restricted pre-sales by developers and increased the minimum reserve requirements at banks for the third time this year.
“It’s very likely that we will see many real estate developers offer more discounts for newly built apartments in Shanghai in the near term,” said Lu Qilin, a researcher from U-Win Real Estate Research Center.
Banks in China can survive a 30-percent to 40-percent decline in home prices, according to a report, adding that Chinese banks have completed a stress test on mortgage exposure.
According to a statement from the Shanghai municipal housing bureau, the idea of a city-wide property tax is “entirely normal”, and added local governments can impose it with the central government’s approval.
China’s growing real estate market is in its “last madness” and speculators may retreat on caution by local authorities, said Li Daokui, an adviser from the central bank.
The Chinese government is trying to reduce the impact of a stimulus package and a US$1.4-trillion lending binge, which restored the economic condition and increased the risk of an asset bubble.
“China has plenty of demand right now, so this is no bubble in my definition,” said Ronnie Chan, chairman of Hang Lung Properties Ltd. “A bubble to me, if you want to be more precise, is the huge rise in market prices in the absence of demand.”
“I think the buying opportunities are ahead of us, not behind us,” he added.